Energy Ministry against West Seti Hydro

Proposed West Seti Reservoir-based Project again faces uncertainty with the Energy Ministry, responsible for development of energy sector in the country, obstructing it.

The dispute has escalated with the ministry taking a stance that the Memorandum of Understanding signed between the Investment Board (IB) and CWE Investment Corporation of China two years ago to develop the project be amended and a new agreement be signed. Energy Secretary Rajendra Kishore Chhetri has suddenly brought proposal to amend the MOU approved by the then cabinet.

Uncertainty about the project has increased with the dispute between the ministry and IB, about whether to move the project forward or not, becoming public. The ministry is not positive about moving this project forward citing provisions of the MOU but the Agriculture and Water Resources Committee of the parliament has already instructed the IB to move the project forward.

Secretary Chhetri is opposing even as Energy Minister Radha Kumari Gyawali is positive about moving the project forward. The project now looks set to be stalled after opposition by the ministry unless Prime Minister Sushil Koirala were to intervene. CWE, a subsidiary company of the China Three Gorges, can step back from the project due to the escalating conflict between the line ministry and the IB.

The parent company China Three Gorges has already made formal decision to develop the project and applied at the IB to bring foreign direct investment (FDI) of Rs 150 billion through CWE for the purpose. The company has submitted working schedule to the IB to complete formation of a joint company for construction and investigation of the project site before monsoon. Chairman of Three Gorges Lu Chun, who visited Nepal last Friday, had also expressed commitment to develop the project but had sought commitment from the government on construction of transmission line, resettlement and rehabilitation of the displaced, and power purchase agreement (PPA).

IB officials say everybody from the ministry including secretary has not been cooperating as projects bigger than 500 MW will be moved through the IB. Both the ministry and the IB have not complied more than two months after the Agriculture and Water Resources Committee directed the two bodies to form a common position about the project. IB claims that common position could not be formed as the ministry does not seem positive to move the project forward even after two stages of discussions between officials of the two bodies.

Secretary Chhetri during the parliamentary committee’s meeting on Tuesday stated that the MOU must be amended before approving FDI, forming the joint company and starting study of the project site. Arguing that he is not against the project he urged to move forward only after amending the provisions of MOU. Arguing that the electricity to be generated by the project will not be needed for domestic consumption, he opined that the government should not make 25 percent of equity investment and construct transmission line.

He insisted that the company should take complete responsibility for resettlement and rehabilitation of over 20,000 families to be affected by the project. But the MOU states that the government will manage resettlement and rehabilitation of over 20,000 families of Doti, Dadeldhura, Baitadi and Bajhang districts and the company will only bear the expenses incurred, as pointed by Chief Executive Officer (CEO) of IB Radhesh Panta. The locals will be provided up to 10 percent shares in the project that will have 65 percent shares of CWE and 25 percent of Nepal government, according to the MOU.

Panta says the project should be moved forward immediately. Stating that the give and take by the state will be discussed during negotiation for the project development project agreement (PDA), he opines that it is more important to move the project forward now than amending the MOU. “MOU with promoters of Upper Karnali and Arun III have been amended during the negotiations for PDA. We can also amend it for West Seti and the process cannot be stopped by citing this reason,” he adds. He clarifies that discussions will be held on the issue of free energy and equity during the negotiation for PDA. He reveals it will take another one and half years to start PDA negotiation after completing pre-construction works. He says proposal will be taken to the board meeting of IB for approval of FDI and formation of the joint company as directed by the parliamentary committee.

Talks about construction of the 750 MW project have been going around for around two decades and the government commits to move the project forward in every annual budget. But the project has not moved forward due to maneuvers by different interest groups. Preliminary study by CWE has showed the project to be financially attractive.

Lawmakers of the districts to be affected by the project say it should be constructed at any cost as it is the backbone for development of the Far West region. “The project has been promised for over two decades. We should now decide once and for all whether the project will be constructed or not,” lawmaker Bir Bahadur Balayar says. “Many games have been played in West Seti. We should not play more and construct the project. The affected locals are eager to cooperate.”